Mortgage lenders need to adopt a digital process to compete

Demand for digital experiences is on the rise. Forty-three percent of homebuyers completed an online mortgage application in 2017. Perhaps even more importantly, 92% of last year's borrowers conducted research online before reaching out to lenders — up from 57% of borrowers who took out mortgage loans between five and 10 years earlier.

As millennials advance in their careers and gain greater purchasing power, interest in the digitization of the mortgage market will become even more profound. Research shows millennial borrowers are 45% more likely to find their lender online than baby boomers.

Lenders looking to keep up with the competition would be wise to adopt a digital process. Not only is there growing expectation for digital lending among millennials, but this technologically savvy generation could also assume a stronger presence within the mortgage market.

Having recently surpassed baby boomers as the largest generation in the U.S. workforce, there's a good chance millennials will move into loan officer positions that are left vacant by retiring workers. Lenders who embrace digital mortgages have the opportunity to deliver the online experience today's consumers expect and more effectively recruit candidates who exhibit an appreciation for digital lending.

Although digitization of the mortgage market is already underway, there's still plenty that needs to be accomplished before lenders can offer a top-notch online experience. From innovations such as Day 1 Certainty to the introduction of Freddie Mac's Loan Product Advisor asset and income modeler, it's important to examine the steps government-sponsored enterprises are taking to further digitize the mortgage market and ultimately increase business for lenders.

The emergence of digital disruption within the mortgage market can be traced back to three key developments: increased mobility, the growth of the cloud and consumer-permissioned data. Instead of waiting for access to a specific service, consumers can now enjoy the convenience of getting what they want, when they want it. Better yet, the ability to scale more quickly through the cloud coupled with greater control over which data points are shared during the lending process can help ensure consumers remain in charge of their financial future.

To bring even more benefits to consumers, GSEs like Fannie Mae and Freddie Mac are equipping lenders with tools like Day 1 Certainty and AIM. Designed to eliminate paper-based processes by automatically validating lender information, Day 1 Certainty promises to pave the way for greater efficiency, accuracy and a better borrower experience. Similarly, AIM leverages asset or income information from a third-party service provider to determine rep and warranty relief eligibility faster than ever before.

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In addition to simplifying the online lending process and subsequently creating more business for lenders, GSEs are also providing helpful resources such as product information, lists of approved vendors and technical specifications. This extra insight can help set the stage for a more seamless transition to digital lending.

GSEs haven't been shy about leading the charge toward mortgage market digitization. Fannie Mae and Freddie Mac in particular have been forward-thinking in their development of new technology. But now that GSEs have offered a glimpse at what online lending can do for business, lenders are looking for other things they can digitize.

GSEs can continue to make a positive impact on the mortgage market by supporting additional income and employment verification. While verification of assets is a great place to start, addressing additional pain points will help win the attention of lenders who aren't yet familiar with the benefits of digitization. For example, Fannie Mae and Freddie Mac are pushing to combine verification from multiple manual processes into one interaction for the borrower that only needs a single data pull.

With interest in digital lending continuing to skyrocket among consumers, it's time for lenders to head online. By taking advantage of current GSE programs and keeping an eye out for future developments, lenders can create a quicker, more convenient borrower experience.